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Written by: Seonaid Charlesworth, PhD Vice President, Executive Assessment and Succession at LHH Knightsbridge

Investing in leaders is critical in a downturn

Retaining strong people is more important in a downturn than when the economy is strong.  The biggest reason is that you’ll expect more from them.  While the workforce shrinks, these leaders will take on more work.  They’ll make more difficult decisions.  You will ask them to step up while people around them are disengaging. 

A resource-based company in Calgary had scheduled to run a leadership development program for its key talent earlier this year.  It was an important investment in these high potential leaders.  A week prior, the Executive Team had made the painful decision to lay off 10% of its managers for the first time in the company’s history.  It was a necessary decision for the survival of the company.   Now was it the right time to proceed with the leadership development program?  The Executive Team said yes.  They rationalized that the quality of leaders who remained now mattered more.  These leaders needed to rebuild their teams, find creative ways to share resources and provide a clear direction to their departments.  They placed a bet that strong leadership was the way through a tough time in the company’s history.

Another reason why strong people matter more in a downturn is that they will always have options to leave you—now or later.  While you have them in the short run, how you treat them will determine whether they will stay in the long run.  If they stay, they could be riding out a soft market, looking for their next opportunity.  And there are many new opportunities surfacing for strong people.  The banks and insurance companies are heading to Alberta to recruit, because they know it is easier now than ever to pry loose strong talent.  Our Career Transition practice reports that many of the people they are supporting through being laid off are finding unexpected opportunities with employers that hadn’t previously recruited them.  For example, a bank recently recruited geoscientists as specialists for jobs they had previously contracted out.

The most important reason why strong people matter more in a downturn is that business decisions are tougher in a downturn. You have difficult decisions to make about the business.  The quality of those decisions will have a greater impact on results than when the market is rising and everyone is making money.  Knowing your key talent helps ensures the right people are making these decisions.

What are companies doing to invest in people during a downturn?  They start by redefining the leadership capabilities the company needs to achieve its business priorities.  A large oil and gas company is engaged in redefining the required capabilities of its leaders to more closely align with its strategy.  It’s shrinking its competency model from 18 competencies down to 2.  This move allows the company to become laser focused on the kind of leadership behaviour that matters most right now.

Next, companies are shifting to highly individualized development for a handful of key leaders.  A poor investment in leadership development when resources are scarce is large-scale programs based on conceptual models of leadership. If there is a 2x2 conceptual model of leadership involved, you’re likely taking leadership out of the business and into the ivory tower.  These investments, if they have a return, take too long to be realized.  A more direct return can be achieved from an assessment center approach to leadership development.  In this program, a handful of leaders tackle simulations of challenges they will face in their business in the next 1-3 years.  Then, they are given feedback and coaching to prepare them for these specific business issues.

A good investment in leadership development is a practical, business focused opportunity.  Some companies are targeting unique experiences to their key talent.  This can include expanding a leader’s portfolio to an adjacent area.   It can also include tough work like turning around an underperforming team or making tough people decisions.  Still another opportunity is to give key talent a rich technical experience like divesting a business or redesigning a program to run at a lower cost.

This downturn is an important opportunity for companies to increase their value proposition to the strongest talent in the market.  Here are three ways you can offer key talent more than your competitors. 

1.       If you recently shifted your business priorities and structure, you likely created succession opportunities sooner than would otherwise have happened.  A global, Calgary-based company recently made a change in its Executive Team.  This one change caused a cascade of succession opportunities deeper in the organization.  When they realized the same high potential leader was on the slate for 9 critical roles, they were forced to take a more rigorous approach to reviewing talent.  Succession opportunities are a great time to review the talent pool, and give leaders a fresh look.

1.       In making tough people decisions, you are putting a spotlight on the quality of each leader’s contribution.  People who have been contributing less than others get noticed more quickly.  Other people may get a second look when leaders realize a different kind of contribution is needed.

2.       A downturn is a great opportunity to review and rationalize investment in corporate programs.  Key talent can take on a redesign of a program or improvement in a process, which can be a once in a career opportunity.  An oil and gas company in Calgary put its leadership development program on hold this year to reduce expenses.  This program had been running for a dozen years.  With the program on pause, some talented leaders in HR reviewed it and found that the content was outdated and misaligned with the company strategy.  They undertook a full redesign of the program to better link it to business results.  When the program runs in the future, it will give leaders a clear understanding of the leadership skills required to execute the company’s strategy.

In a volatile, uncertain market, there is value in investing in strong talent.  Leading companies use the unique opportunities that only emerge in a downturn to build for the future.